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Blank Check Preferred Stock

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Blank Check Preferred Stock
A method companies use to simplify the process of creating new classes of preferred stock to raise additional funds from sophisticated investors without obtaining separate shareholder approval.

Notes:
To do this a company must amend its articles of incorporation to create a class of un-issued shares of preferred stock whose terms and conditions may be expressly determined by the company's board of directors.

This kind of stock can also be created by a public company as a takeover defense in the event of a hostile bid for the company (poison pill).


Blank Check Preferred Stock
This is stock over which the board of directors has broad authority to determine voting, dividend, conversion, and other rights. While it can be used to enable a company to meet changing financial needs, its most important use is to implement poison pills or to prevent takeovers by placement of this stock with friendly investors.

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The authorization of the blank check Preferred Stock and the 1 for 25 reverse stock split was effected on March 15, 2002.
On the amendment to authorize the issuance of 10 million shares of blank check preferred stock -- 9,722,092 shares were in favor, 379,640 opposed, and 74,035 abstained.
The ISS report stated, "Declawed preferred stock eliminates most of the negative effect of blank check preferred stock, but, nonetheless, provides companies with a means of raising capital or funding acquisitions.
 
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